David Cameron has become Prime Minister after agreeing a deal with the Liberal
Democrats to lead Britain’s first coalition government since the Second
World War.

Mr Cameron, 43, becomes the youngest premier since Lord Liverpool almost 200 years ago, and the first Conservative in No 10 since John Major departed 13 years ago.

He promised there would be “hard and difficult work” ahead and said his administration would focus on “rebuilding family, rebuilding community, above all, rebuilding responsibility in our country”.

His appointment followed Gordon Brown’s resignation and brought to an end five days of tortuous negotiations in the wake of last week’s election, which resulted in a hung parliament.

After falling 20 seats short of a majority, Mr Cameron was forced to accept a deal to lead a coalition government with the Lib Dems.

It means that up to six Lib Dems are likely to hold Cabinet posts while a number of high-profile Tory policies have had to be shelved. The Conservatives have also been forced to offer the Lib Dems a referendum on voting reform.

The government will be the first coalition since Winston Churchill’s wartime administration 70 years ago.

Nick Clegg is expected to become Deputy Prime Minister, the first Liberal Democrat in a Cabinet post since Sir Archibald Sinclair was Secretary of State for Air in Churchill’s wartime government.

Today, George Osborne, 38, will become the youngest Chancellor of the Exchequer for 125 years. His deputy, in the role of Chief Secretary to the Treasury, is expected to be Vince Cable, the Lib Dem MP.

Among the other appointments expected to be confirmed today are William Hague as Foreign Secretary and Andrew Lansley as Health Secretary.

David Laws, another Lib Dem MP, could become Schools Secretary.

Danny Alexander, who led the Lib Dem team that negotiated the coalition deal with the Tories, will be rewarded with the post of Scottish Secretary.

There is likely to be at least one Lib Dem minister in each Whitehall department.

Mr Cameron’s appointment as Prime Minister was the culmination of yet another day of high political drama in Westminster.

The day had begun with increasing speculation that the Lib Dems might strike a deal with Labour to form a minority government.

Yet by 7.20pm, Mr Brown had announced his resignation, bringing an end to 13 years of New Labour rule. It will also trigger a Labour leadership contest amid speculation that Mr Brown will also step down as an MP.

His departure became inevitable when talks between Labour and the Lib Dems, which provided Labour with a last-ditch chance to hang on to power, broke down.

A team of Labour negotiators met Lib Dem MPs to try to thrash out a deal but they foundered over Lib Dem demands for cuts to the deficit this year — something Mr Brown campaigned against in the election.

Support from Mr Brown’s own colleagues for a Lib-Lab pact also quickly waned and when a succession of Cabinet ministers criticised Mr Brown’s refusal to accept defeat it was clear he had reached the end of his three-year tenure as prime minister.

That left Mr Clegg to finalise a deal with the Conservatives. Mr Brown decided he could no longer form a majority and visited the Queen at Buckingham Palace to tender his resignation.

Shortly afterwards, Mr Cameron made the same journey and accepted her invitation to form a government. Arriving in Downing Street with his wife Samantha at 8.40pm, he said: “I came into politics because I love this country, I think its best days still lie ahead and I believe deeply in public service, and I think the service our country needs right now is to face up to our really big challenges, to confront our problems, to take difficult decisions, to lead people through those difficult decisions so that together we can reach better times ahead.”

Amid cheers — and some jeers from demonstrators demanding fair votes — Mr Cameron said he and Mr Clegg were ready to put aside party differences to make “the proper and full coalition” work.

Mr Cameron – who within minutes of entering No 10 had received a congratulatory phone call from President Barack Obama — said: “I believe that is the best way to get the strong government that we need, decisive government that we need today.”

And, in echoes of Tony Blair’s promise to be “servants of the people”, the new Prime Minister added: “One of the tasks that we clearly have is to rebuild trust in our political system. Yes, that’s about cleaning up expenses, yes, that’s about reforming Parliament and, yes, it’s about making sure people are in control and that the politicians are always their servants and never their masters.”

The Prime Minister accepted that he would face difficulties having to lead a coalition government.

He said: “This is going to be hard and difficult work. The coalition will throw up all sorts of challenges, but I believe together we can provide the strong and stable government that our country needs, based on those values, rebuilding family, rebuilding community, above

all, rebuilding responsibility in our country. Those are the things I care about, those are the things that this government will now start work on doing. Thank you very much.”

Mr Cameron’s administration will be far from the one he had planned for many months. Some senior Tories are likely to be unhappy with parts of the deal, including the handing over of Cabinet positions and policy concessions that Mr Clegg has extracted from Mr Cameron.

They include offering a referendum on a new voting system, shelving plans for a marriage tax break and committing to a long-term goal of removing all those earning less than £10,000 from the tax system.

The revised policy package emerging last night is likely to mean wealthier Britons will pay an even heavier price for resolving the crisis in public finances as they will bear more of the brunt of tax rises.

The flagship policy of increasing the inheritance tax allowance – which would have led to only millionaires paying the levy – is not now expected to be introduced for several years.

However, last night the details of the deal had not been finalised, leading to suggestions that there remain possible disagreements between the two parties.

The return of a Tory administration — albeit with Lib Dem support — is likely to calm the City. Last night the pound strengthened to 84.85p per euro, from 86.11p on Monday. Sterling advanced against the dollar to $1.4963, from $1.4847.

Mr Brown had earlier emerged from No 10 to announce his resignation as Labour leader. With his wife Sarah behind him, he paid tribute to his staff, family and colleagues.

He said: “I wish the next prime minister well as he makes the important choices for the future.

“Only those who have held the office of prime minister can understand the full weight of its responsibilities and its great capacity for good.

“I have been privileged to learn much about the very best in human nature and a fair amount too about its frailties — including my own.”

Mr Brown paid tribute to Sarah’s “unwavering support and her love” and to his sons — John and Fraser — “for the love they bring to our lives”.

He was leaving, he said, “the second most important job I could ever hold” after that of being a husband and father, which he would now “cherish even more”.

He concluded: “Thank you, and goodbye.”

Mr Brown then walked along Downing Street with his wife and sons holding hands before getting into a car to head to Buckingham Palace to inform the Queen that he was resigning.